Jul 13, 2021 - Technology

The true cost of U.S. internet service

Illustration ethernet cables forming a dollar sign.

Illustration: Shoshana Gordon/Axios

The Biden administration wants to cut Americans' monthly internet bills, making efforts to accurately measure those costs more urgent — and sometimes contentious.

The big picture: The White House's executive order on competition, signed Friday, included a series of policies aimed at reducing what consumers pay for their online connections.

Why it matters: The administration's push to measure internet prices — and the broadband industry's counterargument that Americans actually pay less than consumers abroad — is a prologue to a bigger debate over whether to regulate those prices.

  • "There's a lot of indications that what they charge is very far from a competitive rate, and much more in line with what you'd expect from monopoly or duopoly pricing," Tim Wu, special assistant to the president for technology and competition policy, told Axios in an interview.

Driving the news: Consumer Reports is launching a project Tuesday to collect and analyze price data submitted by tens of thousands of customers sharing their monthly bills for home internet.

  • The goal of the Broadband Together Initiative is to capture the price and speed of internet service in U.S. communities, and to analyze the factors that affect prices — including whether their providers face any competition.
  • "We know anecdotally, that where there's competition, in general prices are lower," Jonathan Schwantes, senior policy counsel for Consumer Reports, told Axios.
  • If the bills show consumers with only one provider pay higher prices "then we can make the case for some government interventions to really do right by those consumers who are stuck," he said.

By the numbers: Consumer bill-paying platform doxo estimated in May that the average monthly cost of U.S. cable and internet is $116, based on its aggregated data from bill payers.

  • Yes, but: That figure is for both cable television service and internet — it doesn't break out the specific price for standalone home broadband.

Meanwhile, President Biden's recent executive order on promoting competition encourages the Federal Communication Commission to require internet providers to regularly report broadband rates to the agency to "improve price transparency."

  • The FCC already collects some price information, but a number of factors — promotions, bundled rates, equipment fees — make it challenging to discern the true cost of service.
  • “Consumers benefit from more transparency in their internet bills," Acting FCC Chairwoman Jessica Rosenworcel said in a statement. "That’s always been true, but it’s especially clear coming out of this pandemic when so much of modern life has moved online.”

What they're saying: ""I think this is an important step for getting a more accurate sense of exactly what prices are being paid," Wu said.

The other side: In a response to the White House executive order, broadband provider trade group USTelecom argued the price of broadband is declining.

  • "The truth is: more Americans have less expensive, more reliable and better broadband service choices today than they did one year ago," USTelecom president Jonathan Spalter wrote.


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